Black Knight to shed unit in bid to save $13 bln sale to ICE -sources

Black Knight

09/02/2023 20:44

By David French
       Feb 9 (Reuters) - Mortgage data vendor Black Knight Inc
 BKI.N  has decided to put its Empower loan origination software
business up for sale in an effort to overcome U.S. antitrust
concerns over its $13.1 billion proposed acquisition by
Intercontinental Exchange Inc  ICE.N , people familiar with the
matter said.
    ICE's takeover of Black Knight would follow its $11 billion
purchase of Ellie Mae, another mortgage software company, in
2020. 
    The Federal Trade Commission (FTC) has been scrutinizing the
Black Knight deal for months amid concerns from some U.S.
lawmakers that the pricing power ICE would gain in the mortgage
data market that lenders rely on could lead to higher costs for
consumers.
    The uncertainty is reflected in Black Knight's share price.
It has been hovering around $60, a deep discount to the roughly
$83 per share current value of the cash-and-stock deal with ICE.
    Black Knight has hired Truist Financial Corp  TFC.N  to help
it explore a sale of Empower and has been soliciting the
interest of potential buyers including private equity firms, the
sources said. ICE provided its consent to Black Knight going
ahead with the move, the sources added. 
    Empower could be valued at around $400 million, according to
one of the sources.
    It could not be learned if Black Knight is carrying out the
sale process for Empower in co-ordination with the FTC. 
    The sources requested anonymity because the matter is
confidential. ICE and the FTC declined comment. Black Knight and
Truist did not respond to requests for comment. 
    It is unclear whether a divestment of Empower would be
sufficient to allay any FTC antitrust concerns. Holly Vedova,
director of the FTC's Bureau of Competition, said in a speech
last week, without addressing the Black Knight deal
specifically, that the agency was not inclined to approve
mergers on the basis of divestitures. 
    "A review of academic research on the adequacy of proposed
remedies reveals concern and skepticism over efforts to fix -
rather than block - anticompetitive mergers," Vedova said.
    Empower would account for only a small slice of ICE's
potential mortgage origination software capacity. However,
Empower and ICE's Encompass unit are the top two vendors for
loan origination software, jointly controlling upwards of 60% of
the market, according to the Community Home Lenders Association,
an industry group which has lobbied against the Black Knight
deal.
    The deal has received a so-called "second request" from the
FTC, a move that indicates heightened scrutiny. 
    ICE, the owner of the New York Stock Exchange, has been
pushing into the mortgage market in recent years as a way to
diversify its business away from share trading.
 (Reporting by David French in New York; Additional Reporting by
Diane Bartz in Washington, D.C.
Editing by Marguerita Choy)
 ((davidj.french@thomsonreuters.com;))